Eskom coal supplier Salungano enjoys solid returns

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Coal demand in export markets remains strong.
Coal demand in export markets remains strong.

The Salungano Group, formerly Wescoal, reported improved annual results thanks to good returns from coal as the company grew its supply to Eskom and also secured its very first export contracts.

In its annual results for the year ended in March, Salungano reported a 32% rise in revenue to R5.1 billion, up from R3.9 billion in the prior year.

Headline earnings per share swung from a loss of 2.87 cents per share to 6.13 cents per share as the group saw increased uptake of coal from Eskom – Salungano’s main customer.

Gross profit increased by 34% to R551 million compared to R411 million in the prior year while operating profit increased by 2% only mainly due to impairment in investment in a joint venture.

A "challenging local market" was offset by a strong export market for coal, which came at a fitting time for the group, as it seeks to diversify our coal sales mix away from Eskom, said Salungano CEO Robinson Ramaite.

"We are therefore pleased to have secured our first export contracts and commenced coal shipments from the Durban port," he said. "We are also actively exploring opportunities to take the first steps in our journey to becoming a diversified investment company with a focus on agriculture and renewables."

However, after careful consideration of the financial position, performance of the group and macroeconomic conditions, the board resolved not to declare a final dividend for 2022, the group said.

Salungano invested R150 million into its operations, most of which was funnelled toward Moabsvelden – a key asset for the group.

At the Arnot Mine, where Salungano retains a 50% interest, supply to Eskom commenced in February despite the various challenges being faced by the operation. These include funding considerations as well as allegations of misconduct and financial mismanagement by key executives – investigations into which are ongoing. 

The group's immediate priorities are to resume production at Vanggatfontein Colliery, ramp up supply to Eskom from Arnot and increase coal supply into the export market.

Salungano said it will also continue to evaluate various growth opportunities in line with its strategy to become a diversified investment company and to play a role in the shift to cleaner energy sources in South Africa.

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